Statement at the Conclusion of an IMF Mission to Cameroon

Press Release No. 11/106
March 31, 2011

An International Monetary Fund (IMF) mission led by Mr. Mauro Mecagni visited Cameroon during March 16–31, 2011 in order to conduct the 2011 Article IV Consultation. The mission worked closely with the Minister of Finance and the Minister of Economy, Planning, and Regional Development. It met with Prime Minister Philemon Yang, State Minister, Secretary General at the Presidency, Laurent Esso, other several ministers, members of the Committee of Finance and Budget and that of Economic Affairs of the National Assembly, the Governor and the National Director of the BEAC, senior officials, the business and diplomatic communities, representatives of labor unions and civil society organizations, and development partners. The discussions focused on recent economic and financial developments, the 2011 budget and its financing, the outlook for 2011 and the medium term prospects. At the end of the mission, Mr. Mecagni issued the following statement:

“The Cameroonian economy is consolidating a broad-based recovery following the impact of the global financial crisis in 2008-09. Economic growth is estimated at 3.2 percent in 2010, up from 2 percent in 2009, owing to the authorities’ earlier support for sectors in distress and stronger external demand for Cameroon’s export products. Inflation has remained contained to date, because of robust local harvests, lower import tariffs on several food items, and government subsidies on fuel products.

“In 2010, the authorities made a significant effort to deal with the legacy of weak public finance management in previous years. Treasury management addressed the clearing of past domestic arrears, thereby contributing to preserve financial stability. In addition, for the first time the government issued domestic currency bonds in the local market, to finance priority infrastructural projects, and was successful in attracting both domestic and foreign investors’ interest. However, non-oil revenue mobilization was behind targets, public investment execution remained low, and new unsettled government obligations were accumulated. On the structural front, efforts to implement fiscal and customs reforms and improve governance and transparency have continued, and the dialogue with the private sector was enhanced through the Cameroon Business Forum”.

“With regard to the 2011 budget, its viability depends on mobilizing significant domestic financing. The budget could come under pressure from (i) the carryover of unsettled payment obligations accumulated in 2010; (ii) the fiscal costs of recently adopted measures to administer basic good prices and expand the civil service; and (iii) the subsidies required to support the policy to keep retail fuel prices unchanged despite the increasing cost of imported inputs. The financing of the budget will also depend on the success of the planned second issuance of government bonds. The mission recommended incorporating these risks in a revised budget framework, taking into account the need for prudent expenditure execution and treasury plans; the financing that can realistically be mobilized; and the need for a contingent plan in case financing does not materialize.

“The mission emphasized the importance of preserving financial stability through strengthened supervision of financial institutions and close monitoring of compliance with prudential regulations. In this context, it encouraged the authorities to work with the regional supervisor to help reinforce its capacity, and to define a coordinated strategy to address any emerging vulnerabilities, while minimizing costs for public finances. It also highlighted the need to clarify as quickly as possible the regulatory treatment of sovereign bonds in bank portfolios.

“The mission concurred with the authorities that the key medium-term challenge is to achieve faster and more inclusive economic growth, in order to reduce unemployment and poverty. In this regard, there is widespread agreement, in the private sector and in the government, that the Cameroonian economy has much higher growth potential, that is currently not being translated into concrete business and employment opportunities. The mission encouraged the authorities to (i) step up the implementation of their Growth and Employment Strategy; (ii) accelerate public investment programs to address infrastructural gaps in energy, water supply and transportation that currently constrain economic development and poverty reduction prospects; (iii) continue to improve governance, the business climate, and creditor rights, thereby contributing to further deepen the role of the financial sector. The mission underscored the importance of continuing to seek appropriate resources to finance public investment projects in a way that would help preserve fiscal and debt sustainability and maintain economic stability”.

“It is expected that the IMF’s Executive Board will discuss the 2011 Article IV Consultation with Cameroon in June 2011. The mission wishes to thank the authorities for their hospitality, the constructive discussions, and the excellent cooperation during the mission.”